Monday 9th Jan marks the first working Monday of the year, which is sometimes referred to as ‘Divorce Day’ given the increased volume of divorce referrals to solicitors after the break. For many tackling the sensitive issue of divorce, financial settlement can be especially difficult, and within that pensions are often overlooked.
James Jones-Tinsley, Self-Invested Pensions Technical Specialist at consultancy Barnett Waddingham, offers three things for anyone concerned about their pension to think about:
- Don’t let pensions sit in your blind spot: The crucial overriding message in any financial settlement on divorce is not to ignore the pensions that each of the couple have accumulated during their lifetimes (in addition to their state pensions). Depending upon what type(s) of pension the divorcing couple have, and how long they have contributed to them, the combined value of their pensions could represent their largest asset – even more so than the value of their home and its contents.
- Spend time making sure all of the paperwork for your pensions is in order; It is important to obtain full information about each of the divorcing couple’s pensions, as early on as possible during the financial disclosure and negotiation process. The sharing of pensions on divorce has been available for over twenty years, despite each pension typically being held in the sole names of the divorcing couple. For example, where one of the couple has a ‘defined benefit’ pension (sometimes referred to as a ‘final salary’ or ‘CARE’ scheme), it may – or may not – be possible for their ex-spouse to become a ‘pension credit’ member of that scheme, as part of the pension sharing process.
- Lean on the experts: The divorcing couple should consider appointing an independent financial adviser (IFA), as well as divorce lawyers, as early on in the disclosure and negotiation process as possible. In particular, those IFA’s who hold the “Resolution Accreditation” means that they understand how to calculate and separate couples’ finances, as well as the softer skills of negotiation, which is vital in achieving a “good” divorce outcome. In addition, they are all pensions specialists. The IFA would work in conjunction with the lawyers to provide advice on all aspects of financial planning, including pensions, mortgages and protection.
